Trade war against China is a damage to Europe

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Welcome to all viewers and all Class CNBC viewers. Ready for our special dedicated to the Chinese economy and also relations between the European Union and China? Let us take our cue from the latest truly significant data from the world of imports and exports to China. On the import side such a high figure was not seen in ten years, a real boom in exports: +32%. Then we go live to China is waiting for Professor Michele Geraci who teaches at Nottingham University in Ningbo. Professor, where exactly are you?

PLEASE NOTE

This text is a transcript of the interview for Class CNBC on the website milanofinanza.it

I just left Xinjiang Province are on the border between Xinjiang and Gansu, two provinces in northwest China. Those areas that the development policy “Go West” is trying to bring back to the levels of coastal city provinces. This is another area of China that I believe will have a higher development in the coming years than the average of the country.

So that’s what you see with your own eyes? The people who are taking their lives back, you mentioned that in the link last month. Trade is giving signs of great recovery, even imports have been at maximum levels for ten years now. A real boom, plus 32 percent! Let’s see how always his direct testimony. What’s happening in China? Are the shops full? Do people go around with masks? Is there still social distance?

Then you live normally, now everything is resumed. In some areas the mask is a must for example in Xinjiang where I have been in these ten days the mask is also mandatory outside. In China you do not travel and you do not enter most of the offices without the app, at the stations there is control, at every check in of the hotels there is control.

That sort of green pass that Europe is studying precisely to allow European citizens to move freely within the European Union but that in China is already a reality. Just to move from region to region and evidently also within the same region, simply to go to the hotel and enter the public offices. In fact, ever since the pandemic broke out, China has relied heavily on technology, a technology that could actually be very invasive. Remember, we are talking about very sensitive data such as those related to health and that allow precisely on these smartphones the Chinese to demonstrate that they do not have the disease or have overcome it or have done a test with negative results and, So we can then enter hotels, shops and even, let’s say, condos.

In the hotel and in some areas of China you need not only the app but also the tampon.

So for every check-in, you have to go to the hospital to swab?

To make the tampon you are organized right next to the reception, at the check in of the hotels. Not all of them, of course, but in some areas where there is more attention where there have been outbreaks or even for those who come from other provinces. So it’s just a DIY tampon set up inside the hotel. They are therefore new jobs that the covid is creating: nurses and assistants, people who run this process. So you check in, you swab, and if there’s no bad news, you go to your room.

Will this be exactly the future for us here in Europe? Do you see any foreign professor around?

So I haven’t seen any foreigners here in Northwest China in two weeks. So only Chinese of various ethnicities obviously because there are ethnic minorities here but no foreigners. Obviously this is a bit negative because these are landscape areas with mountains, great views and plateaus that obviously live tourism in the summer. From March to September, here it is more 30 degrees in summer and less 30 degrees in winter. But with the fact that the Chinese cannot go abroad, they have compensated the foreign tourism that you see here absent with domestic tourism.

Can’t the Chinese go abroad? Why?

Because no one here is planning to come to Europe, there is a fear as well as to go America. They do not feel welcome to us, they get scared. In Thailand they have to do two weeks of quarantine. So they created themselves with, not if you remember, I was in on the island of Hainan three weeks ago which is a tropical island. They have replaced Thailand with Hainan who now lives from this boom and tourism of those who want to go to the sea. And if you want to see the scenery, you’re not going to go to the Alps anymore, but you’re coming here to these parts of northwest China. Be careful I say, I also heard Minister Garavaglia and I told him maximum attention that here the habit changes! That if we miss this second summer season of inbound tourism from China… and once one starts thinking “well I can’t go to Europe, where do I go?” Where it goes the first time it goes the second time, it begins to be this inertia. You create what you remember last year when I said GDP was down 5 percent. And then, unfortunately, there are inconsistencies in these situations and losses are created not only limited to the period in which there are no presences but long-term losses. Then, if I may, we also have geopolitical tensions: our friends in Brussels will also be able to raise their voices with China… and who will pay the consequences? I fear they will be, as always, not those who raise the tone but our young people, our workers and our companies. At some point in Asia they will say, but do you or do you not want to do business with us? Because it is good and Europe, it is good the Atlantic alliance of which we are all obviously supporters… but it should not even be questioned that when the tone is raised as we have seen in recent days with sanctions against sanctions, Now we also have the G7 against Russia and against China instead of thinking of our 400,000 closed companies, of domestic unemployment and of tourism on its knees. We have to understand whether we are doing the interests of our country and our economy or we have entered a new rule where those who are good go ahead and those who are weak will remain behind. And I fear a lot for our country, because we do not have flexibility in labor laws, we have a prohibitive bureaucracy on investments in Italy. Do we want it or do we not want investment? We do not want them because we lose the strategic assets that our companies invest out with relocation and we do not want import because there is also the plan of the deficit, we do not want export because we worry that then they copy us the copyright. I mean, what do we do?

The problem is that Europe seems to have put a little, so to speak, on the ice that agreement so much desired by Chancellor Merkel, when she was president of the European Semester, right between Europe and China. It was said, but we have to wait for Joe Biden to arrive, but Joe Biden has been in office for a few months and in fact everything is still blocked. Professor, in conclusion, I do not know if you are in those areas that are rich in rare earth. Here at Class CNBC services we are also talking about the new boom in terms of raw materials and, in short, companies are also realizing that with the shortage of semiconductors and even those that are the materials needed for semiconductors… We know that rare earths are almost a monopoly for China, is there anything on the front of the commodity boom there in China? Even in the business world, what do you say?

This is a very important question that we need to be very careful about because these trade wars could lead to what is an export boom. China has these rare earths in the inland, in the areas where I am now, in the west of China. And those that it doesn’t have, we say it’s bought. For example, cobalt from Congo and Congo makes 50 percent of cobalt from around the world and China is one of the largest investors. China has a usufruct of many of the Congolese cobalt mines that also serves for electric batteries and other electronic components. My departed economics professor used to say in class that I teach you the formula, but you remember that economics is determined by two things: demography and geographers. Now it’s enough to look at the geography of China to understand that in a trade war, we will be the ones who will be lost, because we have no raw materials and no energy. I speak generally of Italy but also of Europe. In China they have raw materials and energy are creating a little bit. I am here in an area where 43 percent of the energy is renewable. There are wind farms of tens and tens of kilometers. I took a train for 12 hours and, three of these twelve hours, I was constantly watching wind farms with the blades spinning. Because here we are in Central Asia basically a very windy area. So China paying attention at some point could ban exports and therefore whoever manufactures conductors does not sell him the welfare because there is this American ban and China does not sell the raw materials to manufacturers. Because beware, the semiconductor industry is one of the most integrated in the world because there are various internships from design to design. We blocked the acquisition of LTE a few days ago, we exercised the golden Powers because we did not want it to fall into the hands of a Chinese company that among other things did not want to buy it all but only 70 percent. Now LTE and is a company that makes semiconductors but they are not the important ones because you can not make even here of all the herbs a bundle. Semiconductors are very different: those of 50, 100 nanometers are not worth much. The battle will take place at seven nanometers, five nanometers and three nanometers. These are the measures that the Taiwanese, the Koreans and, in part, the Americans can only produce at this time. Not even China! So beware our block of LTE was a good media deal because blocked by golden Powers but be careful not to close as we always do the front door and then instead leave the back door open, because that’s not what makes Italy independent on semiconductors. That is, we do not have them, we should work with the Netherlands but unfortunately the Netherlands is not the best friend of Italy. We also come here to talk about European things but then who knows what we mean, because then we do not share these benefits.

Thank you so much for this connection, see you soon professor!

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